Pot dealers of yore never had to worry about this, but here it is: Even in states where selling marijuana is legal, pot retailers are finding they can’t get standard-issue business insurance.
Big insurance companies aren’t writing policies because the category is so new, it’s hard to price the risk, Carole Walker, executive director of the Rocky Mountain Insurance Information Association, told the Denver Business Journal. The fact also remains that the sale and distribution of marijuana remains illegal under federal law, which puts insurers in a tricky spot.
Professionals with ties to the marijuana field—doctors, lawyers, accountants among them—have been threatened with license revocation despite operating within the bounds of their own state laws. Federal prosecutors continue to go after growers and dispensaries in the 23 states where medical marijuana is legal.
“You still have to have a certain tolerance for risk if you’re getting involved in the industry,” said Taylor West, deputy director of the non-profit National Cannabis Industry Association. “Progress has been made, but nothing has been done to change the fundamental fact that this is illegal.”
Last year, the U.S. Department of Justice announced it would defer to state marijuana laws under some circumstances. That leaves a lot of room for interpretation, which, in turn, has made insurance more important for the business owners. “Because of the history of federal intervention, these business are looking for any way they can find to protect their investment,” said Brian Vicente, a Denver-based partner at Vicente Sederberg, a law firm serving the marijuana industry.
In some cases, it’s not optional. Washington State, where marijuana retailers opened their doors to recreational smokers last week, mandates that pot dispensaries carry liability insurance.
This all means that business is booming for the handful of insurance companies willing to wade into the field of marijuana insurance. J.B. Woods, president of Greenpoint Insurance Advisors, one in a budding field of insurance providers serving the marijuana industry, said the phone is ringing off the hook. “You have no idea how big this is going to get,” Woods said.
But questions—and big gaps—remain. One of the products sold by at least two insurers is raid insurance, which pays legal and replacement costs if a raided business is found innocent. The coverage, of course, doesn’t apply to federal raids. That would be illegal.